The Morning Call
11/15/19
The
Market
Technical
The Averages (27781,
3096) again turned in a mixed performance (Dow down fractionally, S&P up fractionally). Volume was up. Breadth was weaker but remains
in overbought territory. The VIX was down 3/8 %---but continues to support the
breadth overbought reading.
My assumption
remains that momentum is to the upside; but there are still some short term
negatives: (1) October 11th
gap up opens need to be closed, (2) the VIX and breadth suggest equities are
overbought and (3) the rate of change in the upward momentum of the indices is
slowing noticeably.
The bond market continues
to roar back, advancing another 1%. It
is now approaching its 100 DMA which recently reverted to resistance. Clearly, a successful challenge to the upside
would indicate an end to price weakness and the thesis that the economy is
strengthening.
The dollar was
down two cents but remains strong. And that suggests either a strong economy or a
flight to safety.
Gold advanced another
3/8 %; and like TLT is nearing its 100 DMA which recently reverted to
resistance. Also, like TLT, a successful
challenge to the upside would suggest a change in momentum and question the
thesis that the economy is strengthening.
Thursday in the
charts.
Fundamental
Headlines
Yesterday’s
numbers were mixed. October PPI was
above expectations (which makes the Fed happy) while weekly jobless claims were
disappointing.
Overseas,
the data turned negative again. Preliminary
Q3 Japanese GDP growth, Q3 EU employment, October Chinese fixed asset
investments, industrial production and retail sales as well as October UK
retail sales were below estimates. The flash German Q3 GDP was better than
expected; and the second estimate of Q3 EU GDP growth was in line.
Japan’s economy
slows.
China’s economy
slows.
Not only that, but
China’s massive credit expansion is just offsetting rising bad loans (this is really
important).
German economy
narrowly escapes recession.
In other news:
China said that it
is holding in depth talks with US.
***overnight,
Kudlow says trade talks down to the short strokes.
And the Fed announced
its NotQE schedule for the rest of the year---and didn’t disappoint. Money for nothing and the chicks are free.
BofA calls out
the Fed on NotQE.
I have long complained
that one of the ill effects of QE was the inequality of the distribution of wealth. Here are some stats that back me up.
Liquidity trumps
uncertainty.
Bottom line: the
economy is not improving. The only real reason
for even considering that it was the recent pin action in TLT and GLD which were
pointing to higher rates/stronger economy.
Those moves appear to be reversing.
On
the other hand, yesterday the Fed reaffirmed that the liquidity spigot remains
on full blast. And as you know, I
believe that as long as it is, stock prices will continue to advance with the
caveat that at some point investors may wake up to the reality of this
irresponsible policy.
This is for the
bulls. Although I would challenge the
premise that Markets always discount all that is knowable at any one
moment. The operative word is ‘always’. I contend that what the Market knew in
October 2008 wasn’t that much different than what it ‘knew’ six months later in
March of 2009. In October 2008, investors
‘knew’ that the mortgage back securities market had many problems that could
lead to a seize up in the financial system.
They ‘knew’ it because multiple analysts pointed it out. But they chose to ignore it because they were
greedy. In March 2009, they ‘knew’ it because
it happened. But they chose to ignore
the magnitude of the problem because they were fearful. In short, what the Market ‘knows’ and how it
deals with it are two different matters.
That is why having a Valuation Model and a Buy/Sell Discipline is a
better strategy than buy and hold.
2019 dividend cuts
to date.
News on Stocks in Our Portfolios
NIKE (NYSE:NKE) declares $0.245/share quarterly dividend, 11.4% increase from
prior dividend of $0.22.
Economics
This Week’s Data
US
October
retail sales were up 0.3% versus expectations of up 0.2%; however, ex autos,
they were up 0.2% versus +0.4%.
The
Ny Fed manufacturing index came in at 2.9 versus forecasts of 5.0.
International
September
Japanese industrial production rose 1.7% versus estimates of +1.4%; capacity utilization
was +1.0% versus -0.6%.
The
September EU trade surplus was E18.7 billion versus consensus of E17.5 billion;
its October CPI was +0.1% versus +0.2%.
Other
Not
surprisingly, Hong Kong’s Q3 GDP contracted 3.2%.
https://www.zerohedge.com/economics/hong-kong-shocked-first-annual-recession-global-financial-crisis
Mortgage
delinquencies fall to 25 year low.
What
I am reading today
The
making of Americans.
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